Correlation Between Dow Jones and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Goldman Sachs at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dow Jones and Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Goldman Sachs Nasdaq 100, you can compare the effects of market volatilities on Dow Jones and Goldman Sachs and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dow Jones with a short position of Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Goldman Sachs.
Diversification Opportunities for Dow Jones and Goldman Sachs
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Dow and Goldman is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Goldman Sachs Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Nasdaq and Dow Jones is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dow Jones Industrial are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Nasdaq has no effect on the direction of Dow Jones i.e., Dow Jones and Goldman Sachs go up and down completely randomly.
Pair Corralation between Dow Jones and Goldman Sachs
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.94 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, Dow Jones Industrial is 1.3 times less risky than Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. Goldman Sachs Nasdaq 100 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,388 in Goldman Sachs Nasdaq 100 on November 19, 2024 and sell it today you would earn a total of 1,675 from holding Goldman Sachs Nasdaq 100 or generate 49.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 66.33% |
| Values | Daily Returns |
Dow Jones Industrial vs. Goldman Sachs Nasdaq 100
Performance |
| Timeline |
Dow Jones and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Goldman Sachs Nasdaq 100
Pair trading matchups for Goldman Sachs
Pair Trading with Dow Jones and Goldman Sachs
The main advantage of trading using opposite Dow Jones and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Goldman Sachs can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Dow Jones vs. National CineMedia | Dow Jones vs. Emerson Radio | Dow Jones vs. Space Communication | Dow Jones vs. JD Sports Fashion |
| Goldman Sachs vs. Global X Dow | Goldman Sachs vs. AdvisorShares STAR Global | Goldman Sachs vs. Global X Funds | Goldman Sachs vs. FT Vest Dow |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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